Signature cops a 'please explain' over Pulp buy

Less than a day after listing on the stock exchange, Signature Brands was yesterday forced to explain why it had agreed to pay up to $5 million for a fruit juice business recently set up by its chairman, Ian Duffell.

After recently raising $3.2 million from the public through a sale of 16 million shares, Signature said it intended to issue an additional 6.6 million shares for the purchase of Pulp Juice, a six-outlet juice chain set up by Mr Duffell and several other ex-Virgin Group executives last March.

While Signature said the acquisition price was $2 million in a statement to the ASX, the 6.6 million shares to be issued would suggest a value of $5.1 million for the acquisition based on Signature's closing share price of 78c yesterday.

Asked why a company promoting itself primarily as an apparel and wine branding house had suddenly developed an interest in juice bars, Mr Duffell said: "I am more sensitive to this than anyone else because I know it's a related party [transaction]."

"We put our own funds [into Pulp Juice] which are very close to the cost being purchased for it," he said.

The former Brazin managing director added that there was nothing untoward in the acquisition, given that it would still have to be approved by Signature shareholders in coming weeks.

"If we waited another six months the value of Pulp would have increased," Mr Duffell added.

Despite Mr Duffell's assurances, the Australian Shareholders Association's Stephen Matthews said: "These related party transactions are cause for some angst, to say the least."

Signature chief executive Sean Neylon said the acquisition was a good fit with Signature's lifestyle brand focus - given the company has previously said it will hone its efforts on the relaunch of the Brian Rochford swimwear brand and the development of the Olivia Newton-John inspired Koala Blue label.

"We picked that business at a very good price," he said, referring to Pulp's good growth outlook and ability to generate high cash flows.

Signature said it hoped to have 50 Pulp stores within 18 months, and to expand the business overseas.

"In the following years to come it will be a very good investment for SBL shareholders," Mr Neylon said.

He predicted that the "high margin" business could one day generate revenues of up to $60 million a year.

"The shareholders will judge this acquisition, and the shareholders have judged today by making the share price go from 60c to 78c," he said.